Paul Reed Smith crafts mahogany and maple into the electric guitars played by the likes of Mark Tremonti of Creed and Carlos Santana.
The founder of PRS Guitars recently discussed the economics of making axes and how he gets them into the hands of the next big act.
When did you make your first guitar? How did you get interested in the business?
I made my first guitar at St. Mary?s College [in Southern Maryland] as an independent study project. I wanted to be a guitar maker — and my mother and father thought it would be a good idea for me to go to college and be a math major and also to hang out with a couple thousand kids my own age. That was the spring of 1975.
How many guitars will you make this year?
[In Maryland], we?ll manufacture over 13,000, and we?ll make another 4,000 or 5,000 overseas.
How many do you employ?
One hundred seventy in Maryland. We?re looking to double the square footage that we have. We will have more employees when that building is complete. We?re going to try and double our size physically and then double our size in revenues, but that takes years.
When will the new facility open?
I hope within two years.
Carlos Santana is probably the most famous PRS customer. It looks like your sales really took off after he won several Grammies two years ago. Has that trailed off since?
It wasn?t just that he got the Grammies, it was that the rock guitar came back. If you remember, there were a lot of women playing acoustic guitars on the radio before that, Jewel, there was a lot of that going on. I would say that Carlos was a part of the rock guitar coming back.
Also, we made more guitars, that helps. There were years where we could have made more guitars and sold them. We were production-restricted in some ways before that. We are not now.
The longevity of how many years our employees have been here have helped. This is a very skill-oriented manufacturing business; each person needs to have considerable skill. We?ve got people that will be here their whole lives.
What do these guitars go for?
Average retail is about $3,000. They go as low as $700 retail.
What?s the most-expensive guitar you sell?
Something about $30,000 retail. Mostly, that?s the inlay work. That guitar has a dragon head inlayed into the body, about 300 pieces of abalone, mammoth ivory, shell — all kinds of stuff.
Your sales were $21.5 million last year. What are your projections for this year?
It looks like a little over $25 million. The $21 million, that was up 50 percent from the year before. So if we go to $25 million, that?s a 15 [percent]-to-20 percent increase.
I?d say 20 percent growth is what?s normal for us. There?s been years where it?s way less than that, and there?ve been years where it?s been more. Everything is cyclical. Our growth is dependent on the market, the acceptance of our models at the time and our ability to produce.
In terms of the market, how important are getting these guitars into the hands of the popular musicians?
It?s very important. If you?re a guitar player, and nobody famous is playing the guitars we make, it doesn?t give you a lot of confidence. If you know that people who are making their living on these instruments are using them, that gives you confidence.
About 40 [percent], 50 percent of the bands on VH-1, one of the guys in the band, plays our guitar. I think we?ve been very successful.
How do you do that? Do you find them once they?re on VH-1 or do you have to catch them before they get there?
Both. We have an artist-relations liaison, who?s always looking. One of the guys from [the band] Incubus was in the factory yesterday.
What?s the strangest request you?ve ever gotten for a custom guitar?
It sounds weird, but it makes sense in the end. Somebody sent me a purple balloon. He said blow it up, hold it up to the light and that?s the color I want the guitar to be. Now, it?s one of our colors. It was actually a very intelligent way of showing us a color.
We?ve had some very strange things happen in our business, but they weren?t around people requesting guitars. People walk in here with tattoos of “PRS” on their arms or their backs.
You were the Small Business Association Maryland Businessman of the Year, and you?ve just donated an electric guitar to each of the 208 high schools in the state. When will they arrive?
The letters I?m getting, it looks like they?re either arriving at this moment or in the last few weeks. Even my kids have heard about it from their friends in other schools.
What?s next for PRS?
We have a Tremonti SE that we?ve released. That?s a less-expensive guitar that Mark Tremonti of Creed has endorsed.
These are not the best retail times in the world. Things have been very different in the marketplace since September 11th. Interest rates are down, the number of people walking into stores are down. [But] interest in our guitars is high.
I think there was a quote from the Federal Reserve Board that there is no model for the economic times that we?re in right now. This is new territory. We?re trying to use our guts and our intellect to understand what?s going on and make the best judgments.
You mentioned a less-expensive guitar. Do you want to expand into the lower-priced part of the market because people have less cash now?
No, it?s not because people have less cash. It?s because the percentage of guitars that are bought in the higher-priced joints is much less. Obviously, there?s going to be more people that can come into a store and afford a $500 guitar than a $2,500 guitar.
Would you like to be producing more guitars overall?
Only if there?s a demand for them. I don?t like it when people produce just in the hopes of selling them. I think it?s real important that there?s a want and a demand for them, otherwise you don?t have a real business on your hands.
So you don?t want to be a Gibson, for example? You?d rather stay in the niche.
I didn?t say that. Gibson is a competitor of ours. They have a history in our business that is very real.
When you say, “Do we want to be somebody else?” no. We want to be whatever our path is.
In a way, our competitor is ourselves. If somebody opens the case and says, “Boy that?s beautiful” or “That sounds good,” then it sells — regardless of what anyone else has done.
In a way, the guitar business is like the violin business: Really good violins sell and will forever. Really good guitars sell.
It?s nice that we?re not in the electronics business because that changes so fast. Wooden guitars are going to be around for a long time.
